What is Compound Interest?
Compound interest is the process where interest is added to the principal,
and future interest is calculated on the new total. This creates exponential
growth over time—often called the "Eighth Wonder of the World."
Compound Interest Formula
A = P (1 + r/n)nt
- A = Final Amount (Future Value)
- P = Principal (Initial Deposit)
- r = Annual Interest Rate (as decimal)
- n = Number of times interest compounds per year
- t = Number of years
Why Compound Interest Matters?
- Time is Power: The earlier you start, the more your money grows.
- Exponential Growth: Unlike simple interest, your interest earns interest.
- Financial Goals: Essential for retirement and long-term wealth planning.
Explore more tools:
Break-even Calculator |
CAGR Calculator